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Thursday, February 21, 2008

Save the Penny, Save the World



OK. Maybe I've watched the box set of Heroes Season One too many times recently, but once again people in Congress are trying to kill the penny again. 60 Minutes ran some great reports on this topic recently.

Given the run up in the cost of all commodities, especially Copper and Zinc, it should be no shock that the cost to make a Penny AND a Nickel are higher than the face value on the coins. No one is talking about offing Jefferson ...yet, but old Abe is in the cross-hairs again.

In 1982 they changed the Penny from 95% Copper and 5% Zinc to 97.5% Zinc and 2.5% Copper. But now the price of Zinc and Copper are such that the penny costs 2 cents to make. So what to do?

I frankly can't see the US Congress cutting the penny. The short term savings of $130 Million to stop all production of pennies, doesn't outweigh the inflation estimates of $600 Million from the American for common sense. Advocates that say, "prices will round down too and balance this out", sure have forgotten what happened to all of those countries that changed over to the Euro.

The next morning in Germany, instead of just seeing the equivalent price in Euro's from their old Deutche Marks, they found prices rolled up to the nearest Euro- .99 mark. An average inflation of 4.5%...overnight! This alone has been the rally call for other European counties to avoid the currency!

The US economy is scared with 3.1% inflation over a year...imagine 4.5% overnight!

I don't think this has real legs to get passed, but instead of charging the mints with monitoring and adjusting metallurgy as needed, some in Congress take a knee-jerk reaction that could cost us hundreds of Millions!

Abe, save us...you are our only hope!

13 Comments:

Sharon said...

Wow. Prices would never roll down, but definitely up, for sure. Most people just save their pennies. Perhaps if put them back into circulation the government wouldn't have to produce as much...

Spend your pennies!!!

The Bright Side said...

I've always wondered why there is such a need to keep producing pennies because there are so many floating around, kind of like paper clips. But, I never thought about those that hoard pennies being a contributing factor for the continued production. I would prefer to get rid of pennies all together and have the nickel being the lowest denominator of currency. I'm sure my purse would be a lot lighter.

RacerX said...

@Sharon- Maybe. They do just produce what is needed. That wouldn't help the issue that the unit (penny) costs more than its face value. They just have to makeit cheaper.

@Brightside - You purse would be lighter, but you would get hit with pretty tough inflation nearly overnight. Think of just this if every item you buoght at the grocery store was 1-4 cents higher, how much would that cost? Eventually this will happen, I just don't want it to happen yet!

Thank you both for visiting!

Fiscal Musings said...

There are a ton of other things the government could focus on and save just as much if not more.

RacerX said...

Fiscal you are so right! Not to mention add 4% inflation!

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